David Cameron told by Berlin: drop demands for repatriation of powers

German finance minister dismisses prime minister's demand by saying EU treaty change in financial crisis will be short and sharp

Wolfgang Schäuble, the German finance minister, has indicated that Britain should not be demanding the repatriation of powers from Brussels during the eurozone crisis. Photograph: Geoff Caddick/AFP/Getty Images

One of Europe's most significant political figures passed through London with barely a murmur this week.

Perhaps it is his under-stated manner or Britain's disengagement from Europe which meant that Wolfgang Schäuble, the German finance minister, did not receive the sort of attention accorded a US heavyweight.

But British ministers will have been left in no doubt about the significance of Schäuble's appearance in London a few days before EU leaders try to reach agreement on a credible eurozone bailout plan at a Brussels summit on Sunday. This is not just because Schäuble, 69, is one of the "nearly men" of European politics who would probably have succeeded Helmut Kohl as chancellor had the CDU not lost the 1998 election. In the end a younger mentor of Kohl's – Angela Merkel – became the next CDU chancellor seven years later.

Schäuble, who held talks with George Osborne, had an important message for Britain: forget any attempts to use the eurozone crisis to repatriate EU social and employment laws.

Schäuble, who took part in a question and answer session with academics at Chatham House, left some of his London audience with the impression that Germany did not believe that Britain would have any bargaining chips in the negotiations. His apparent remarks prompted alarm bells in Westminster and Whitehall because David Cameron told the 1922 committee in July that the eurozone crisis would give Britain a golden opportunity to repatriate powers. The social and employment laws handed over by Tony Blair, when Britain signed up to the social chapter in 1997, were top of Cameron's list.

In an end of term address back in July, the prime minister told his MPs that any moves towards greater fiscal co-ordination among the 17 members of the eurozone would require a revision of the Lisbon Treaty. At this point Britain would, in common with all 27 members of the EU, have a veto. The prime minister's remarks echoed his comments to the Spectator on 7 July:

There will be opportunities for Britain to maximise what we want in terms of our engagement with Europe … I got us out of the [euro] bailout mechanism which has been used repeatedly and from 2013 cannot be used again, so I think I exacted a good and fair price for Britain going ahead with this treaty change. Are there more things we're going to be able to do? Yes, I think there will be opportunities.

The intervention by Schäuble in London this week prompted fears that Germany thinks that it can deal with the eurozone crisis without resorting to treaty change. There are already concerns in the foreign office about what is being dubbed "caucusing" by the 17 members of the eurozone. British ministers fear that eurozone leaders will try to hold their own meetings in future before meetings of the European Council which are attended by all 27 heads of government. They would agree a position which they could then impose on the rest because the 17 eurozone members would probably be able to form a majority under the Qualified Majority Voting System (QMV) for any change that does not require unanimity.

It turns out that Schäuble's thinking is more straightforward, though unhelpful for Cameron. I understand the finance minister believes there will need to be treaty change. But he believes this should be narrowly focused on one aspect of the Lisbon treaty to allow for a more common fiscal approach among the members of the eurozone. He believes this will need to be done quickly to reassure the markets. This means Berlin believes the eurozone crisis is no time for Britain, or any other EU member, to open up the treaty with their own national demands.

The message from Berlin is clear. Britain has a veto but it should refrain from wielding it to demand the repatriation of powers at such a delicate time for the eurozone.

The remarks by Schäuble are unlikely to come as a surprise to the foreign office. William Hague warned eurosceptics over the weekend that there would be no immediate move on repatriating powers from Brussels when he said this could only happen if there are "major change in the European treaties". This, he added, is not on the table at the moment.

But the Schäuble remarks will come as a surprise in other parts of Whitehall. There is some irritation in the foreign office with the prime minister for stating so definitively that he would seek to repatriate powers. Senior sources point out that, quite apart from unease in the rest of the EU, there is no majority in the House of Commons for such a move because of Liberal Democrat opposition.

Schäuble is something of a hero to many because of his lengthy political career – he first entered the Bundestag in 1972 – and because of the bravery he has shown after he was shot in an assassination attempt in 1990. He was paralysed from the waist down and will need a wheelchair for the rest of his life.

But just as Britain often does not understand its continental partners, so too do the likes of Germany often fail to understand Britain. Brogan's column serves as a reminder of the unique pressures on Cameron. No member of any cabinet in any significant EU member state, other than Britain, wants to leave the EU. Such thinking helps to explain why Cameron occasionally annoys the foreign office by talking about the repatriation of powers at awkward moments.